Oil prices fell 3 percent on Tuesday as dealers rushed to take profits from a rally that had culminated in a 10-month peak earlier in the day.
U.S. crude oil dropped $2.32 to settle at $72.05 a barrel, down from a high of $75, in the biggest percentage loss since August 14. Brent crude dropped $2.44 to $71.82.
It looks like crude tested the $75 level and failed, said Tom Bentz, a trader with BNP Paribas.
Players said oil's more than 65 percent rally this year was a good opportunity for some to lock in profits.
There's been profit-taking in the energy markets, said Tim Evans, analyst at Citi Futures Perspective in New York.
Oil prices had shot up in earlier trading after U.S. reports showed increased consumer confidence and higher home prices in the world's largest energy consumer -- adding to a string of encouraging economic indicators.
Wall Street stock indexes climbed to their highest levels since October's plunge <.N> on the back of the data, getting further support from news U.S. President Barack Obama renominated Ben Bernanke as chairman of the Federal Reserve.
Oil prices, which usually track equities markets closely, could hold around current levels next year, according to a Reuters survey of more than 30 analysts.
The analysts raised their consensus forecast for the fifth straight month on expectations higher fuel demand in an economic recovery would support prices.
Oil extended losses slightly after settlement in the wake of a report from the American Petroleum Institute showing a surprise 4.3-million-barrel build in U.S. crude stocks last week.
Analysts in a Reuters survey had forecast a 1.1-million-barrel decline in crude inventories, adding to last week's sharp fall pegged to weak imports.
The U.S. Energy Information Administration will release its report on nationwide petroleum stockpiles on Wednesday.
(Additional reporting by Ramthan Hussain in Singapore and Ikuko Kurahone on London; Editing by David Gregorio)